Writing-Down Allowances for Intellectual Property Rights (IPRs)

To enhance Singapore’s attractiveness as a location for businesses to hold and commercialise IPRs, writing-down allowances are granted on capital expenditure incurred in acquiring IPRs under Section 19B of the Income Tax Act.

Capital Expenditure in Acquiring IPRs

The writing-down allowances apply to capital expenditure incurred by a company from 1 Nov 2003 to the last day of the basis period for Year of Assessment (YA) 2020 in acquiring IPRs for use in its trade or business.

For this purpose, "capital expenditure" excludes legal fees, registration fees, stamp duty and other costs related to the acquisition of the IPRs.

IPRs Covered under Section 19B

For the purpose of claiming writing-down allowances, IPRs are:

  1. Patents;
  2. Copyrights;
  3. Trademarks;
  4. Registered designs;
  5. Geographical indications;
  6. Lay-out designs of integrated circuit;
  7. Trade secrets or information with commercial value*; and
  8. Plant varieties (with effect from YA 2011).

* In line with the policy intent of Section 19B, in the definition of IPR, the expressions "trade secret" and "information that has commercial value", and any work or subject-matter to which the expression "copyright" relates, exclude the following:

  1. information of customers of a trade or business, such as a list of those customers and requirements of those customers, gathered in the course of carrying on that trade or business;
  2. information on work processes (such as standard operating procedures), other than industrial information, or technique, that is likely to assist in the manufacture or processing of goods or materials;
  3. compilation of any information as described in paragraph (1) or (2); and such other matter as the Minister may by regulations prescribe.

For more details on the above IPRs, please refer to IPOS' website .

Requirement of Transfer of Ownership

To be eligible for writing-down allowances, the transferee (i.e. company that acquires the IPRs) must acquire the legal and economic ownership of the IPRs from the transferor (i.e. person who sells the IPRs to the transferee), except for cases where approval for waiver from legal ownership has been granted by the Economic Development Board (EDB) under Section 19B(2B) with effect from 17 Feb 2006.

Legal ownership means the legal assignment of the IPRs is granted to the transferee. 

Economic ownership means the future economic benefits attributable to the IPRs will accrue to the transferee.

Calculating the Writing-Down Allowances

Prior to YA 2017, writing-down allowances will be granted to the transferee on a straight-line basis over a 5-year period beginning from the YA of the basis period in which the capital expenditure is incurred in acquiring the Intellectual Property Rights (IPRs).

With effect from YA 2017, to recognise the varying useful lives of IPRs and allow taxpayers the flexibility to choose their writing-down period while maintaining a simple and certain tax regime, a company will be allowed to make an irrevocable election to claim the writing-down allowances over a 5-year, 10-year or 15-year period (on a straight line basis) beginning from the YA of the basis period in which the capital expenditure is incurred in acquiring the IPR. The irrevocable election applies for IPRs acquired from YA 2017, and will have to be made via a Declaration Form (93KB) Revised! at the time of lodgment of the income tax return (Form C-S/ C) in the first YA of the writing-down allowances claim. You are encouraged to use the e-Service Submit Document to submit the Declaration Form.

Company A acquired an IPR from a third party for $450,000 in YA 2016 (excluding legal fees, registration fees, stamp duty and other costs related to the acquisition). Company A can claim writing-down allowances of $90,000 ($450,000/5) per YA from YA 2016 to YA 2020.

Company B acquired an IPR from a third party for $450,000 in YA 2018 (excluding legal fees, registration fees, stamp duty and other costs related to the acquisition). Depending on the election made, Company B can claim writing-down allowances of:

  • $90,000 ($450,000/5) per YA from YA 2018 to YA 2022; or
  • $45,000 ($450,000/10) per YA from YA 2018 to YA 2027; or
  • $30,000 ($450,000/15) per YA from YA 2018 to YA 2032.

The election to claim the writing-down allowances over a 5-year, 10-year or 15-year period should be submitted via a Declaration Form (93KB) Revised! at the time of lodgment of its YA 2018 corporate tax return.

For approved IPRs acquired from 22 Jan 2009 to the last day of the basis period for YA 2018 on:

  1. Films;
  2. Television programmes;
  3. Digital animations or games; or
  4. Other media and digital entertainment contents

by an approved media and digital entertainment company for the purpose of its trade, writing-down allowances shall be granted over two years on the capital expenditure incurred on the acquisition of these IPRs.

A media and digital entertainment (MDE) company must make an application to EDB. The acquisition cost of IPRs acquired will qualify for the shorter writing-down period, or accelerated writing-down allowances, only upon approval by EDB. This applies whether the applicant acquires both legal and economic ownership of the IPR or the applicant only acquires economic ownership but not the legal ownership of IPR.

As the scheme is assessed to be no longer relevant, the two-year write-off scheme for media and digital entertainment contents will be allowed to lapse after the last day of the basis period for YA 2018.

With the lapsing of the scheme, a MDE company may elect to claim writing-down allowances over a writing-down period of 5-year, 10-year or 15-year on the capital expenditure incurred to acquire the qualifying IPRs under Section 19B of the ITA.

Productivity and Innovation Credit (PIC)

From YAs 2011 to 2018, as part of the PIC scheme, capital expenditure incurred to acquire IPRs can:

  1. qualify for 400% writing-down allowances instead of 100% allowances subject to a certain expenditure cap; and
  2. 100% writing-down allowances on the balance expenditure exceeding the cap.

This excludes IPRs that are granted waiver of the legal ownership condition by EDB and IPRs pertaining to films, television programmes, digital animations or games or other media and digital entertainment contents approved by EDB for writing-down allowances over two years.

Claiming Writing-Down Allowances

A company claiming writing-down allowances is required to submit the following documents/ information together with its Form C or Form C-S.

  1. Declaration Form (93KB) Revised! to confirm that the ownership requirements of the acquired IPRs have been met and for IPRs acquired from YA 2017, make an irrevocable election to claim the writing-down allowances over a 5-year, 10-year or 15-year period at the time of lodgment of the income tax return (Form C-S/ C) in the first YA of writing-down allowances claim. You are encouraged to use the e-Service Submit Document to submit the Declaration Form.
  2. Third-party independent valuation report on the value of the IPRs acquired where:
    (a) the capital expenditure incurred in acquiring the IPRs is ≥ $0.5 million for a related party transaction; or
    (b) the capital expenditure incurred in acquiring the IPRs is ≥ $2 million for an unrelated party transaction.

For the purpose of the requirement to submit a valuation report, the company and the transferor (i.e. person from whom the IPRs are being acquired) are considered to be "related parties" where one person, whether directly or indirectly, has the ability to control the other or where both of them, whether directly or indirectly, are under control of a common person

    1. Independence - The valuer and the firm that the valuer belongs to are not related to the transferor or transferee, and have no interest in the acquisition/ disposal of the IPRs.

      If the valuer is also undertaking other assignment(s) or had undertaken other assignment(s) for the company within the past two years of the date of the valuation report, the valuer must disclose the relationship, and demonstrate that there is no conflict of interest between the valuation assignment and the other assignment(s) undertaken.  
    2. Qualification - The valuer must possess the relevant qualifications. Full particulars of the qualifications and the professional institute that awarded the qualifications have to be provided in the valuation report. Examples of a valuer who possesses the relevant qualifications are Chartered Valuer and Appraiser, Chartered Financial Analyst and Chartered Accountant.; and
    3. Experience - The valuer has experience in valuing similar types of IPRs or IPRs in similar industries.

    Where a valuation report is submitted, the amount that is eligible for writing-down allowances is the actual capital expenditure incurred on acquiring qualifying IPRs, where it does not exceed the Open Market Price ("OMP") of the qualifying IPRs on the acquisition date. The Comptroller can make adjustment to restrict the writing-down allowances granted on the OMP of the qualifying IPRs if the acquisition price of the qualifying IPRs is higher than the OMP.

    The Comptroller reserves the right to require a second independent valuation or to adjust the amount eligible for the writing-down allowances, if there is reason to believe that the true value of the IPRs (on an arm's length basis) is materially different from that presented in the valuation report.

    Disposal of IPRs from YA 2011

    Where the IPRs come to an end without being subsequently revived, or a company permanently ceases to carry on the trade or business for which the IPRs were acquired, no writing-down allowance shall be granted to the company for the year in which the event occurs or any subsequent year.

    Any writing-down allowances granted previously shall not be deemed as income in the year in which the event occurs.

    Where a company sells, transfers or assigns all or any part of the IPRs, the transaction could result in a balancing adjustment.

    Proceeds from disposal of IPRs is greater than tax written down value (TWDV)Proceeds from disposal of IPRs is less than or equal to the TWDV

    Balancing charge is computed.

    No balancing allowance is granted.

    The difference between the sale price and the TWDV of the IPRs shall be deemed as income (i.e. a balancing charge) and brought to tax in the year of disposal.

    The balancing charge is capped at the amount of writing-down allowances granted previously.

    The difference between the sale price and the TWDV of the IPRs is not available to the company as a balancing allowance in the year of disposal.

    If the IPR's disposal price is lower than its OMP, the Comptroller can compute a balancing charge based on the OMP of the IPR.

    For details, refer to the e-Tax guide on Intellectual Property Rights Valuation Report for Purposes of Section 19B of the Income Tax Act (535KB) New!.

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